Global Sustainable Supply Chain

Baxter educates and empowers its global Purchasing Supplier Management (PSM) personnel and the company's broader employee population to influence purchasing decisions and implement supplier initiatives that enhance sustainability performance. These efforts support and strengthen Baxter's commitment to reduce its environmental impact while maintaining continuity of supply and managing costs.

Global Supplier Sustainability Program

Through Baxter's Global Supplier Sustainability Program, the company integrates sustainable practices into its procurement policies and procedures. The program focuses on:

• Sustainable supply chain - Procuring products and services that that make a positive contribution to society and the environment by embracing ethical, environmental and social principles (see below);
• Material compliance - Working with suppliers to meet the growing number of regulations worldwide related to product materials (see below);
• Water Security Program - Providing a framework for better understanding the possible impact water scarcity may have on Baxter's supply chain (see below); and
• C-TPAT (Customs-Trade Partnership Against Terrorism) Program - Collaborating with governments and other businesses to strengthen international supply chains and U.S. border security (see below).

Baxter monitors global PSM progress in implementing the company's sustainable supply chain programs as well as supplier progress in applying Baxter's sustainable criteria. The company also tracks suppliers' progress in their own sustainability programs, and incorporates results into supplier business reviews.

Purchasing teams and individuals globally chose a performance goal for 2011 tied to the company's sustainability initiatives, based on the unique needs of his or her country. For example, each manager in Baxter's corporate headquarters focused on submitting stories for the e-Impact program to encourage collaboration with suppliers.

Sustainable Procurement

One of Baxter's 2015 sustainability goals is to incorporate sustainable principles into its purchasing program. Baxter and its suppliers both benefit from these efforts.

Since 2009, Baxter has integrated 20 sustainability criteria into its purchasing procedures to provide its procurement organization a framework to evaluate suppliers' sustainability initiatives. These criteria fall into five categories that align with Baxter's own sustainability efforts, including a category added in 2010 to evaluate suppliers' protection of human rights. Baxter conducts an annual survey of 100 select suppliers to evaluate their performance against these criteria. In 2011, Baxter incorporated additional questions into this survey related to human rights.

RFPs and Supplier Agreements

Baxter considers cost, quality, environmental criteria and other factors when selecting and evaluating its suppliers to reduce the company's environmental impact while maintaining continuity of supply and managing costs. To support these efforts, Baxter incorporates language related to sustainability in Request for Proposal (RFP) and supplier contract templates to reiterate Baxter's commitment to sustainability and assess each supplier's ability to support Baxter's sustainability goals and conduct their business activities consistent with Baxter's established standards for its suppliers. This language is now included in these documents in Australia, Brazil, Canada, Chile, China, Colombia, Mexico, New Zealand and the United States.

Baxter's updated RFPs ask suppliers to provide:

• Their sustainability policy and mission statement;
• A description of company sustainability initiatives and outcomes;
• A list of sustainability-related awards received;
• Disclosure of environmental violations and fines for the past three years;
• Details on purchasing from diverse suppliers, particularly related to products and services in the RFP (as applicable); and
• Information about other initiatives that would support Baxter's sustainability goals.

Baxter's standard supplier agreement requires U.S.-based suppliers to certify compliance with federal and state equal opportunity laws. Suppliers also commit to make good-faith efforts to consider small, minority-owned, women-owned, veteran-owned and other diverse suppliers when engaging their own suppliers.

The agreement also encourages suppliers to support Baxter's sustainability initiatives by identifying for Baxter's use products and/or services with reduced environmental impact. Baxter asks its suppliers to provide regular updates on their sustainability activities.

Product Material Regulatory Compliance

Effectively tracking the materials and chemical substances used in products and manufacturing is complex since a product may contain many components from numerous suppliers worldwide. To better meet this challenge, Baxter contracted with a specialized service provider to manage environmental and other information related to new and existing products. This includes information about product materials content, which will help Baxter evaluate compliance with the European Union Restriction of Hazardous Substances (RoHS) and Registration, Evaluation and Authorisation of Chemicals (REACH) Directives as well as similar existing and emerging regulations in other parts of the world.

Baxter began contacting suppliers in September 2010 as part of the company's Material Compliance Project. This initiative ensures that materials used in Baxter's products comply with a wide range of environmental regulations in Europe, individual U.S. states, and other countries worldwide (e.g., Australia, Canada, China, Japan and South Korea) while maintaining high-quality standards and satisfying customer requirements.

Baxter stores data collected from suppliers in a database that interfaces with other company and supplier information systems, to allow Baxter to better understand, manage and optimize product environmental performance and meet customer needs while facilitating regulatory compliance. In 2012, Baxter plans to work with a service provider to survey the company's suppliers for additional substances of very high concern.

See Materials Use and Materials Restrictions for more information about Baxter's programs in related areas

Water Security Program

Water scarcity is a growing problem that affects governments, businesses, and individuals in many parts of the world. Baxter's water security program, launched in 2010, provides a framework to help the company better understand the possible impact water scarcity may have on Baxter's supply chain and its impact in local communities. The program helps Baxter identify potential risks and opportunities and act responsibly on this issue while enabling the company to maintain continuity of supply and manage related costs.

In 2011, Baxter surveyed suppliers in water-stressed areas to determine their level of knowledge regarding water scarcity. The survey also asked suppliers if they have programs to address this issue and identified potential areas for Baxter to collaborate with suppliers to mitigate possible water-related risks.

Read about Baxter's additional efforts related to Water and Wastewater.

U.S. Customs-Trade Partnership Against Terrorism (C-TPAT) Program

In 2011, Baxter was recognized as a Tier III Partner in the U.S. Customs-Trade Partnership Against Terrorism (C-TPAT) program. C-TPAT is a joint U.S. government-business initiative that builds cooperative relationships to enhance U.S. border security, with a focus on strengthening security throughout the supply chain. As a C-TPAT participant since August 2009, Baxter has committed to maintaining Tier III security criteria as well as ongoing enhancements to the security of its global supply chain.

Tier III is the highest level an importer can achieve in the C-TPAT program. Currently, only approximately 3% of the more than 10,000 program participants have achieved this status. Baxter's internal C-TPAT steering committee remains committed to monitoring and enhancing its supply chain practices and implementing process improvements as needed.